balance of payments

Definitions

noun a comparison between total receipts and payments arising from a country’s international trade in goods, services and financial transactions.

noun a statement of the international financial position of a country, showing transactions which have taken place over a certain period, usually one financial quarter. It includes invisible as well as visible trade; all trade and movements of money between the residents of a country and other countries worldwide, including export sales and import purchases which when added must produce a balance. A balance-of-payments deficit occurs when a country imports more than it exports and so pays out more in foreign currency than it earns; this is also called a trade deficit. A balance of payments surplus occurs when a country sells more to other countries than it buys from them.

The difference between the value of all imports and the value of all exports for a country over a given period of time, including all financial imports and exports. A positive balance of payments means that more money is flowing into the country than is flowing out. A negative balance of payments means the opposite.

(written as Balance of Payments)
The balance of payments is the record of a country's trade dealings with the rest of the world. It has two main parts. The current account shows the flows of trade in visible and invisible goods (like health services) plus the net effect of interest, profits, dividends and transfers. The capital account shows flows of investment and other (financial) capital (payment and repayment of debts). 'Official financing', in the form of changes in the central bank's holdings of gold and foreign currency and debt, meets any overall deficit when the current and capital accounts are added together (ignoring statistical errors). By definition the balance of payments must balance. A balance of payments surplus or deficit are therefore slightly misleading terms. A current account balance of payments deficit that is judged to be unsustainable will need remedial action. Although it is often seen as a symbol of a country's economic virility, a balance of payments surplus is not necessarily beneficial since it involves the central bank holding more assets in the form of short-term foreign government debt, and this typically earns a lower rate of return compared with other ways of investing taxpayers' contributions to public investment.

noun the international financial position of a country, measured according to the level of imports and exports

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